GlaxoSmithKline Fined Again – The Cost of Doing Business?

It is seen as the cost of doing business. It may be illegal, but is also highly profitable, so why stop?

That seems to be the attitude of many pharmaceutical companies – and the latest proof of that comes in the form of a $105 million fine leveled against GlaxoSmithKline Plc.  (GSK). The California Attorney General Kamala Harris announced the fine saying her state, as well as 40 others, were sold on asthma and antidepressants Paxil and Wellbutrin that were promoted for unapproved uses.  Doctors can prescribe a drug for an off-label use but the company is not allowed to promote the drug for that treatment.

The states will divide the fine, with California receiving the largest portion $7.1 million.  Texas stands to receive just over $6 million while New Jersey and Pennsylvania will receive $2.45 and $4 million as part of the settlement deal. Florida, Georgia and Colorado are among the remaining states that expect to see money from the GSK settlement.

GSK is based in London and has heard these claims before.  China has alleged that doctors and hospitals were bribed to use the GSK drugs and the same charges have been heard from Jordan, Lebanon, Poland and Iraq. It is against federal law to bribe doctors in other countries and in 2010 the Department of Justice began looking into the allegations.  So far, no one has gone to jail.

The latest fine is just a financial slap on the wrist.

Two years ago GSK paid $3 billion to resolve claims it marketed its drugs off-label and that it did not turn over relevant data on the diabetes drug Avandia.  And the company paid $1 billion to settle claims that it knew but hid relevant information that Paxil was linked to birth defects.

So what do fines actually do to deter corporate malfeasance?  Very little, it appears. When Johnson & Johnson paid billions over Risperdal and Abbott Labs paid billions over its antiseizure drug the payments came from monies set aside after shareholders were told. The bottom line is the bottom line. When you tally the columns –  sales versus fines – the drug company is still in the black. For example, for GSK’s Avandia was very profitable at over $10 billion in sales, Paxil at nearly $12 billion and Wellbutrin at $6 billion.

Putting corporate executives in jail might have more of an impact.

Four executives of Synthes, a medical device company, spent just under one year in prison for clinical trials the company conducted that the FDA had not approved. An executive of K.V. Pharmaceuticals spend 30 days in jail and paid a $1 million fine for selling misbranded morphine, reports the New York Times. He was excluded from doing business with the federal government such as the lucrative Medicare and Medicaid market, which may be another real deterrent. Glaxo says it will remove bonuses from those executives who engage in illegal behavior.

Too little too late, but it is a start.